Futures set for Saddam capture rally

Dollar resumes weaker trend

By

EmilyChurch

LONDON (CBS.MW) - U.S. stock futures were confidently higher on Monday as dealers looked for a rally on the open after the weekend's capture of Saddam Hussein inspired stock gains from Tel Aviv to Tokyo to Frankfurt.

Bellwether tech stocks were changing hands 1 percent to as much as 3 percent higher on the New York ECNs. The Nasdaq 100s tracker
QQQ, -1.36%
was up 1.7 percent; the S&P 500s tracker
SPY, -0.60%
was up 1.1 percent.

Two car bombs Monday in Baghdad, however, underlined the continuing terror threat. The dollar reversed gains against the euro by mid-morning in London and spot gold recouped some of its overnight stumble to close to $400 an ounce. Gold was last around $405 oz in London.

"To the extent that the capture of Saddam has little or no material impact on the dynamics in Iraq, then it should not have a lasting positive impact on the U.S. dollar," said strategists at ABN Amro, a Dutch bank. "The car bombs exploding in Baghdad... already suggest that an immediate end to the violence is unlikely."

German stocks surged 1.8 percent to open above a 52-week high and the French CAC 40 index rose 1.4 percent. The markets were last off their peaks, with German's DAX up 1.3 percent. See European Markets

"Europe and the U.K. are not particularly convinced by the rally. The FTSE is up a meager percent while the (German) DAX is just sitting doing nothing," said Tom Hougaard, futures trader at City Index, a London financial spreads bettor.

Travel-related stocks in London and on the Continent, such as cruise operator Carnival (CCL)
CCL, +1.23%
and British Airways (BAY)
BAB, -0.08%
were among leading gainers, rising 3 percent and 2.7 percent respectively. French luxury goods stocks were higher, led by LVMH (012101).

In Europe, Saddam's capture in a hole Saturday night in Iraq was being seen as a boost for President George Bush in his re-election campaign.

The Saddam arrest "dispels some of the doubt that Americans might have had on the need to intervene in Iraq, and on the duration and the human cost of that intervention," said strategists at BNP Paribas, a French bank. "And if it can bring forward the establishment of democracy in Iraq and the departure of coalition troops, it will also ease U.S. public finances."

In U.S. stocks, Intel Corp.
INTC, -0.59%
was marked at $31.55, up from a $30.86 close, dealers at Madoff Securities said. Cisco Systems
CSCO, -0.84%
was at $24.45, up around 35 cents. GE
GE, -1.29%
was at $30.70 from a $30.11 close.

Focus stocks

German chemicals group Henkel (604843) said late Sunday it has reached a deal to acquire the Dial Corp.
DL, +0.60%
in an all-cash deal worth $2.9 billion.

Under the terms of the agreement, which is subject to regulatory and shareholder approval, Dial shareholders will receive $28.75 per share, a premium of 11 percent.

Following the completion of the deal, Henkel expects to sell a "significant" portion of its minority investments in either or both of The Clorox Co.
CLX, +0.90%
and Ecolab
ECL, +0.19%
chief financial officer Lothar Steinebach said, AFX reported from Duesseldorf. Henkel shares were down 3.1 percent; Dial shares had yet to trade but were seen higher, dealers in London said.

El Paso Corp.
EP, +4.88%
eased 0.6 percent in very small trade to $6.70 after it announced an agreement to merge GulfTerra natural-gas pipeline with Enterprise Products Partners
EPD, -1.93%
in a deal that will net El Paso $1 billion in cash to cut debt. See more

IBM
IBM, -1.10%
told managers to plan on moving the work of as many as 4,730 software programmers to India, China and other lower-wage cost nations, the Wall Street Journal reported, citing company documents.

Navistar
NAV, -2.12%
said it expects a loss of 40 to 50 cents per share for the first quarter of fiscal 2004, which is historically weak for the truck engine maker due to holiday production shutdowns. The outlook surrounds the current mean estimate of seven analysts polled by Thomson First Call for a loss of 45 cents per share in the period.

Disney
DIS, -0.58%
said late Friday in a 10K filing that it expects its pension cash contribution to increase in fiscal 2004 to about $130 million from $25 million in 2003, with total costs of the plan and post-retirement medical costs rising to $375 million. Additionally, Disney said its plans to close or sell Disney Stores will likely result in charges in the second and third quarters of 2004 as it terminates leases.

H&R Block
HRB, -1.12%
the tax filing processor, said late Friday in an 8-K filing that the Securities and Exchange Commission is investigating how the company made loans to customers based on their expected tax refunds. H&R Block said it is cooperating with the investigation.

Elsewhere from the brokers, Credit Suisse First Boston downgraded AT&T
T, -0.23%
to neutral, after the telecoms carrier week said it sees around a 6 percent decline in its outlook for Business revenue in fiscal 2003. "We believe the magnitude of this decline represents a shift in AT&T's tactics, with the company now willing to aggressively price down to defend share," CSFB said.

Morgan Stanley lowered its fourth quarter earnings per share to 34 cents to reflect the change in business services revenues expectations. "Any thought that competition in the telecom services industry had peaked was greatly exaggerated," the broker said.

AT&T was marked up 10 cents at around $19.10, dealers in London said.

The weaker dollar triggered some revisions to analyst forecasts for U.S. big caps with large overseas exposure.

UBS raised its price target on Coca-Cola Co.
KO, -0.03%
to $58 a share, citing its expectations for better long-term margins. The broker raised its 2004 earnings per share forecast by a cent to $2.08. "Currency trends suggest upside to these estimates, as 75 percent of KO's income is foreign," UBS said.

Lehman Brothers raised its earnings per share estimate on Dow Industrials component Procter & Gamble
PG, -0.23%
by 2 cents for the December quarter to $1.27 a share, as the broker looks for stronger revenue contribution from foreign currencies.

USB Piper Jaffray upgraded Internet advertising firm DoubleClick
DCLK
to "outperform" from "market perform," citing expectations of increased ad volume and higher prices in 2004, and the belief the current consensus analyst earnings forecasts are too low. Shares rose 4.2 percent on Instinet in very small trade to $10.02.

J.P. Morgan Securities said it expected some pressure on shares of Tower Automotive
TWR, -3.33%
after the company after the close Friday announced it will not redeem the $200 million in convertible subordinated note by year-end.

"We would expect a negative stock market reaction as Tower suffers from considerable liquidity pressures and the market may conclude that the company is delaying the redemption because of weaker than anticipated cash flow," the broker said. "The company has assured us that this not the case. Instead, it cites delays on securing the documentation needed to draw down on the bank lines of credit established for the purpose of redeeming the convertible subordinated notes."

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